Scott Clark and Peter DeVries

Scott Clark is currently President of C. S. Clark Consulting. Prior to that Mr. Clark held a number of senior positions in the Canadian Government dealing with both domestic and international policy issues, including deputy minister of finance and senior adviser to the prime minister. He has an honours BA in Economics and mathematics from Queen’s University and a PhD in Economics from the University of California at Berkeley.
Peter DeVries is currently a consultant in fiscal policy and public management issues, primarily on an international basis. From 1984 to 2005, he held a number of senior positions in the Department of Finance, including Director of the Fiscal Policy Division, responsible for overall preparation of the federal budget. Mr. DeVries holds an MA in economics from McMaster University.

Most governments table budgets, pass them and move on. Not Harper’s. The 2015 budget was supposed to be the tax-slashing centrepiece of Stephen Harper’s campaign for a fourth mandate; instead, it vanished without a ripple, even as the Conservatives’ poll numbers faded. So they’ve been tinkering with it ever since.

Last week, Finance Minister Joe Oliver stunned the House when he announced that the government is open to the idea of having employees and employers make higher voluntary contributions to the Canada Pension Plan (CPP). He launched this trial balloon just a few weeks after tabling the budget — which was odd, since changes to the CPP normally would be announced in the budget speech itself. But the Harper government has its own take on ‘normal’ operations — and it never stops campaigning.

First, the good news. In his first budget, Finance Magician Joe Oliver pulled a few rabbits out of his hat to fulfil his government’s vow to balance the budget in 2015-16. He sold GM shares at cut-rate prices, cut the contingency reserve by $2 billion and booked a “settlement” of $900 million for a new disability and sick leave management system for federal government employees.

It was a near thing, but he managed to make both columns come close enough to balance to pay for the ‘family tax cut’ package that’s at the centre of the Harper government’s re-election pitch. In fact, the news is better for the government than it seems willing to admit — since it looks like 2014-15 has turned in a surplus of almost $3 billion.

With five months to go before the vote, the talk is all about taxes now. Earlier this month, the Liberals released their middle-income tax package, which they intend to promote as a better alternative to the Conservatives’ ‘family tax cut’ package.

The Liberal plan includes a cut in the middle tax rate of 1.5 percentage points, which would cost $3 billion. To pay for this, Justin Trudeau proposes a new 33 per cent federal tax rate for taxable incomes above $200,000, up from 29 per cent. (In fact, the increase in average tax for someone earning over $200,000 would be only 2.2 per cent, taking into account the reduction of 1.5 percentage points in the second tax rate.)

The Harper government holds the insitution of Parliament in contempt. (The feeling is mutual, apparently.) This contempt gets expressed in ways large and small — none more egregious than its habit of dumping omnibus bills on MPs’ desks.

Whatever else Finance Minister Joe Oliver’s budget managed to accomplish, it did manage to set the pool rules for party platforms going into the coming election. The theme is taxes; the platforms all seem to offer variations on the theme.

And so we have the Liberals competing with the Conservatives’ ‘family tax package’ with a broad-based income tax cut of their own; the policy is the same, only the targets have changed. Justin Trudeau wants to jack up taxes on the ‘one per cent’, while Tom Mulcair sees an opening to raise corporate taxes to finance his own platform. All three parties are vowing balanced budgets — the Conservatives’ balance is based on some rather sunny forecasts for the price of oil in the coming years, but that’s another issue.

The calendar says it’s 2015, but for all intents and purposes the Harper government is running on the platform it offered in 2011 — give or take the odd anti-terrorism bill. The pre-election debate has been captured entirely by the question of tax cuts — how much, who should get them — while the bigger question of how to revive a comatose economy is getting short shrift.

In the days since Finance Minister Joe Oliver emerged from his winter den to deliver a long-delayed budget, members of Ottawa’s pundit corps have been falling over each other trying to describe the Harper government’s fiscal platform as a masterstroke of political tactics — a ‘clever’ bit of election-year maneuvering meant to paint the New Democrats and Liberals into a corner.

Finance Magician Joe Oliver did the expected, pulling a handful of rabbits out of his hat to achieve the long-promised balanced budget for 2015-16. “Mission accomplished” for the Conservatives? Not quite.

On April 8, Finance Minister Joe Oliver stood up before the Economic Club in Toronto and delivered what can only be described as one of the greatest “fantasy economics” speeches in decades.

It was a message from a parallel universe — one in which the Harper government delivered ‘sound economic management’ through the recession (it didn’t), the economy recovered its pre-recession growth pattern (it hasn’t) and Ottawa is delivering tax relief for the average Canadian household (it isn’t). Stranger still, it’s a parallel universe where Pierre Trudeau is still around, haunting us.

Nobody ever gives Joe Oliver credit for his sense of humour. But the speech he gave to the Economic Club of Canada last week has to rank among the best stand-up routines in Canadian comedy history.

The punchline, of course, was the Finance minister’s vow to introduce balanced budget legislation, to fulfil a commitment made in the September 2013 throne speech. It’s a bad, bad idea — but that’s not what made it funny.

No, what made it funny was the fact that a government which hasn’t recorded a single surplus in seven years, which has ramped up the federal debt by $150 billion, is now promising to pass a law against … what it’s been doing since it was first elected. Hysterical.

Like a hedgehog emerging from hibernation, Finance Minister Joe Oliver finally came out of hiding last week to announce that the federal budget — his first, possibly his last — will be tabled on April 21.

It’ll be balanced in 2015-16, he said — the drop in nominal and real GDP notwithstanding. Mr. Oliver, you’ll remember, gave himself an extension on budget timing to wrap his head around the damage done to the Conservatives’ re-election strategy by the freefall in the price of oil.

It’s been like some bizarre political pastiche of Hinterlands Who’s Who: The Canadian finance minister … a shy, reclusive creature who nests in the oilsands and tends to hibernate whenever the price of oil drops below $70.

Joe Oliver is expected to come out of his cloister Thursday morning with a promised “announcement” at the Canada Goose garment factory in Toronto. Will he finally name a date for releasing the budget? Will he announce a tax holiday for makers of high-end parkas? At this point your guess is as good as ours; a budget date announcement seems likely, but nothing in this government’s pre-election fiscal strategy has gone according to plan so far.

Politicians love announcing infrastructure projects. Canadians know that much of the nation’s key infrastructure — in health, transport, utilities and education — is falling apart. There’s an election coming, which (under normal circumstances) would see campaigning politicians climbing over each other to get to the ribbon-cutting first. So why the silence?

It was only eight weeks ago — January 13, to be precise — that Joe Oliver announced he was postponing the budget until sometime after April 1. His excuse: Rapidly falling oil prices were creating an unusually high degree of budget uncertainty and he needed more time to assess.

The excuse was, of course, nonsense. Budget planning always involves uncertainty. The greater the uncertainty, the more the government needs to prove that it has some sort of plan — a budget, for example.

The decision to postpone the budget was a panic response to the stark fact that the Conservative election plan (pitch major tax cuts in October, then table a balanced budget) had just gone off the cliff. Plan A was falling to pieces; the Conservatives, in their arrogance, never bothered to come up with a Plan B.

Politicians don’t like talking about taxes much. Spending taxes — they love doing that, and they love getting credit for it. But when it comes to talking about how we collect the money that runs the state, they cling to slogans — “putting money back into taxpayers’ pockets”, for example.

And there’s no question that, since coming to office in 2006, the Conservative government has cut taxes. But they’ve mostly been the wrong taxes, cut for the wrong reasons. Tax cuts aren’t just about reducing the overall tax burden on citizens — although that is important. But cutting the right taxes at the right times can spur economic growth, employment, savings rates. Cutting the wrong taxes can end up accomplishing nothing at all — beyond robbing the state of the revenue it needs to do its work, and winning a few points in the polls, short-term.

“Our Government’s sound economic management and unwavering commitment to balance the budget this year — while creating jobs, growth and long-term prosperity for Canadians — has resulted in a resilient economic performance in a challenging global economy. As Canada is doing with its Economic Action Plan, we encourage G-20 countries to follow through on their commitments to create jobs and a strong, sustainable and balanced global economy.”

This was a prepared statement released by Finance Minister Joe Oliver as he left for the G-20 meeting of finance ministers in Turkey last week. It’s standard Department of Finance boilerplate. It’s also gibberish.

The price of making risky political commitments is the threat of getting it wrong at the worst possible moments. Right now, the Harper government is paying for a series of budget blunders: assuming the price of oil would continue coasting along at 2014 levels, vowing to balance the budget in 2015 come hell or high water, and exploding any prospect of a backup plan with a costly set of tax-cut promises well before the start of the election campaign.

For weeks, politicians and the media have been obsessively arguing over Finance Minister Joe Oliver’s decision to delay the budget until after March 31.

If the minister keeps to his word, the earliest the budget could be tabled would be in the week of April 20. The later the budget is tabled, the less time there is to ensure timely passage of any accompanying legislation — without, of course, the use of time limits and closure.

When Finance Minister Joe Oliver did a backflip over budget timing on Jan. 15 — postponing his government’s pre-election budget to April, maybe even May — he claimed he was just being prudent, looking to get more information about the forces roiling the international oil market before committing to a revenue forecast.

That’s his story and he’s sticking to it. It’s hogwash, of course. Governments don’t put off budgets because of the performance of a single commodity, even one as important as oil. Markets rise and fall all the time; if every finance minister asked for an extension because of a dip in the market, budgets would never get written.

It’s a cliché, of course, but it bears repeating here: One definition of insanity is doing the same thing over and over and expecting different results.

In other words, when circumstances change, your plans should as well. In last year’s budget, the price of oil was at $110 a barrel. In June that price began to fall and by October, it was down close to $80.

So the writing was clearly on the wall in late October when Prime Minister Harper announced, with great fanfare, a package of tax cuts worth roughly $4.6 billion per year that included a very costly commitment to income-splitting. The tax cut package was the pre-election plan, you see, and the PM apparently saw no reason to alter the plan.